Diageo’s interim CEO has emphasised that the business would not do anything “to compromise the long-term health” of its brands as it details cost-saving measures against a backdrop of falling profit.
It has been far from plain sailing at the spirits business in recent times, with CEO Debra Crew stepping down last month “by mutual agreement” following falling share prices. Her two-year tenure was marred by declining profits amid a tough consumer environment for spirits.
The pattern of declining profits continued as Diageo reported its preliminary results today (5 August). Operating profit declined 27.8% year-over-year, for the 12 months ending 30 June 2025. Net sales declined marginally (-0.1%) to $20.25bn (£15.24bn).
Diageo’s interim CEO has emphasised that the business would not do anything “to compromise the long-term health” of its brands as it details cost-saving measures against a backdrop of falling profit.
It has been far from plain sailing at the spirits business in recent times, with CEO Debra Crew stepping down last month “by mutual agreement” following falling share prices. Her two-year tenure was marred by declining profits amid a tough consumer environment for spirits.
The pattern of declining profits continued as Diageo reported its preliminary results today (5 August). Operating profit declined 27.8% year-over-year, for the 12 months ending 30 June 2025. Net sales declined marginally (-0.1%) to $20.25bn (£15.24bn).
Against this backdrop, Nik Jhangiani, the company’s chief financial officer who has taken up the role of interim CEO following Crew’s departure, detailed cost-saving initiatives designed to save the business $625m (£471m) over the next three years.
I don’t think we would do anything to compromise the long-term health of our business and our brands.
Nik Jhangiani, Diageo
The cost-saving programme, known as Accelerate, features “advertising and promotional efficiencies” as one key pillar; however, Jhangiani was keen to emphasise that the business was committed to investing in its brands.
He noted that as a consumer-branded company, advertising and promotional (A&P) investment is “critically important” for Diageo.
“I don’t think we would do anything to compromise the long-term health of our business and our brands,” he said. “So when I talk about the efficiency and the effectiveness of our A&P spend, it is in areas such as the non-working or the development costs.”
In its most recent fiscal year, development costs made up 14% of Diageo’s marketing budget, down from 21% in the year prior. The business spent $3.66bn (£2.75bn) on marketing in its 2025 fiscal year, down slightly from the $3.69bn (£2.02bn) it spent in the year prior, but “broadly flat” when excluding currency changes.
Until last year, the spirits company had a history of consistently stepping up marketing investment each year. Indeed, between 2017 and 2022, it upped spend by almost £1bn. That pattern of strong investment continued in 2023, with Diageo increasing marketing spend by 6%. But last year (ended 30 June 2024), advertising and promotional investment was “flat”, a pattern that has continued this year.
Speaking today, Jhangiani insisted that, in terms of consumer-facing spend invested in its brands, Diageo is actually spending more.
“When you look at the fact that overall, our reinvestment, in terms of absolute dollars, stayed consistent, that means that we’re investing more behind our brands,” said Jhangiani, referencing the fact that a larger proportion of spend is now going behind consumer-facing activity.
Leveraging AI
As part of its cost-saving efforts, Diageo is reducing the proportion of its marketing budget that it spends on “development” and using AI technology instead.
It has created a “virtual content studio”, Jhangiani said, allowing it to tweak global campaigns for different markets.
“We built out much more with speed on marketing campaigns through our virtual content studios, to be able to build in cultural nuances or elements of differentiation for a market without having to spend a lot in terms of the cost,” he stated.
For example, it activated its Guinness Premier League partnership across 81 markets in fiscal 2025, with AI allowing the brand to more efficiently leverage work with the correct nuances or tweaks for each consumer audience.
Another pillar of Diageo’s efficiency-driving scheme is a plan to be more “targeted” in how the business invests, and to create more standalone market operations. Jhangiani gave the example of Southern Europe, where Diageo previously had one operating unit, despite very different drinking cultures from market to market.
“Now, with separate market teams, we can capitalise on these distinct growth opportunities and be more consumer and customer-centric,” he said.
During Crew’s tenure, weak consumer sentiment dampened demand for spirits. While Diageo had maintained this was a trend, there had been some questions about whether the downturn in the category was more permanent.
Today, Jhangiani spoke about the moderation trend and asserted that consumers being more conscious about how much they drink isn’t necessarily a negative thing for the spirits business. Consumers are still socialising, he said, adding that spirits as a category has gained share from beer and wine.
“We believe the versatility of spirits positions the category well for the future across occasions and evolving consumer trends, including moderation,” he said.
Pairing mental availability with physical
Guinness, Don Julio and Johnnie Walker were highlighted by Jhangiani as examples of very strong brands within Diageo’s portfolio. He acknowledged that the business needed to drive broader success in the future.
“Clearly, we need to get the business firing on far more cylinders than just these three brands,” he said.
While the three brands were highlighted for their strength, it was not smooth waters for them either, with Johnnie Walker seeing an organic sales decline in fiscal 2025. However, it maintained share in what is a very tough market for Scotch whiskey.
“We’re focused on accelerating Johnnie Walker recruitment through premiumisation and scaling innovation across the price ladder,” Jhangiani asserted.
Don Julio was another stand-out for Diageo, with the brand seeing double-digit sales growth across all regions, as it leveraged special editions and partnerships to recruit consumers into the brand.
Particularly in the UK, Guinness was another bright spot highlighted by the interim CEO, with the stout brand driving double-digit growth and share gains in its top markets of Great Britain, Ireland and the US.
The success of Guinness in GB has been such that the brand saw shortages in the year, but Jhangiani insisted Diageo “made all the right moves” to ensure its bar and retail customers in the market had stock.
Across the portfolio, driving strong relationships with customers is a key priority for Diageo going forward, Jhangiani said, emphasising commercial excellence as a focus for him.
“I want to re-establish Diageo as the partner of choice, so that our physical availability in stores and bars matches up with the mental availability that our brands and marketing have established,” he said.
This will see the company optimise its trade investment, outlet activation and “establish a clear picture of success”.
